Wealth Management
(New York)
The new year brings many opportunities for advisors. One which is not utilized enough is the implementation of goals-based investing. The new year naturally brings a focus on goals, resolutions, and planning, making it the perfect time to get clients to commit to defining their goals and how their portfolios can get them there. Goals-based investing has been known to help get clients to really commit to their investments and stay in the market for the long haul.
FINSUM: This approach can get help clients get more bought into their own planning and strategies and help give meaning to why they are saving/sacrificing/investing. Just make sure the goals they give are genuine, as many clients will not put enough thought into describing these. There are also a number of funds that directly cater to a goals-based approach.
(New York)
2020 was a very unique year for recruiting. In particular, despite the obvious market and economic turmoil, it was a year in which almost all aspects of going independent got more favorable. Not only did working from home making recruiting conversations with new firms easier, but working from home itself made going independent seem less daunting. Further, firms’ appetite to offer great packages to recruit has grown considerably since this time last year, so it is certainly an advisors’ market when it comes to moving.
FINSUM: One other point to mention here is that clients themselves have also gotten more comfortable with their advisors being independent. The lack of office visits and growth of Zoom communication has limited the need for the big well-known logo in the office lobby when clients arrive. Independents seem likely to gain more market share.
(New York)
Many wealth management firms find themselves challenged by female clients. The industry has long been dominated by male advisors, and many firms have been slow to adapt to the needs of female clients. The increasing asset controlled by women has created more urgency to rectify this issue, and one approach that might aid in understanding how to better serve women is goals-based investing. According to one firm that has been very successful with female clients, “Women have to understand why they are doing stuff”. According to studies, meeting financial goals is more important to women than to men, and women tend to put more thought and work into defining the goals for their finances. Thus, making sure to deeply understand goals and explaining how certain investing/wealth management approaches will meet them is integral in making women feel comfortable.
FINSUM: Goals-based investing has many utilities in wealth management, and this one applies to a critical industry issue.
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(Washington)
The House Financial Services Committee sent a very strong message to president-elect Joe Biden this week: dissolve Reg BI. Chaired by Maxine Waters, the committee said that the Trump administration had "taken several actions that have eroded shareholder rights, established regulatory barriers to shareholder engagement, increased issuer involvement in the proxy voting advice process and stripped away fundamental investor protections, including safeguards around private markets, where investors have few protections”, and that Biden should take care of the issue by getting rid of Reg BI, and separately, CRS altogether.
FINSUM: Industry experts seem to agree that the Biden Administration is unlikely to completely unwind Reg BI, if only because getting a new rule through would require Congressional approval. While that could still happen depending on how the Georgia runoffs go, it seems more likely the new SEC team would just employ very strict enforcement of Reg BI.
(New York)
Goals-based investing and planning is a well-known, but not greatly understood topic within asset and wealth management. The idea of goals-based investing is to make the goals for investment clear so as to match them to life needs and keep motivation high for clients. However, many advisors do this incorrectly and resultingly think it is ineffective. The main problem is always that advisors don’t take enough time to truly understand their clients’ goals. Many clients, when posed question about goals, will give half-hearted answers that they think they should say (e.g. a comfortable retirement). It is on advisors to dig deeper and truly understand what they want. For example, a client who is fully engaged might say they want to buy a retirement home on the coast when they are 65 and afford to give their daughter a six-figure wedding.
FINSUM: If the goal that you are trying to align investment to isn’t completely genuine for the client, then it doesn’t truly serve as motivation. That said, true insight into what a client wants can deliver enormous value.
Did you know that most advisors spend 5.5 hours per week handling investment management related tasks like searching for funds? That stat comes from Kitces.com and does a good job highlighting what has become an increasingly difficult problem for advisors: how to find the right funds when there is an ever-increasing ocean of options, including many that look very similar. Between screeners with limited criteria (I want “value ESG”, not just “value”) and the pain of cross-asset class searches, finding funds has increasingly become a real quagmire for time and effort. Imagine if you could have three extra hours per week to focus on new client acquisition instead of cycling through drop-down menus trying to find funds? Well, a company called Magnifi has a great new tool to help you do just that. For example, international stocks are getting some attention from Wall Street analysts right now because of their favorable valuations versus US stocks. However, finding the right international funds is even harder than doing so for domestic stocks. For example, you might want to find the best ETFs focused on Asia. Because of the antiquated architecture of existing fund screeners, it would take hours of work to pin down funds in the right fee range and with the right composition. Instead, Magnifi uses natural language search to immediately display and compare all the relevant funds for your query. For example, here are the results for searching “China Value Funds”.
Another great thing about Magnifi is that they incorporate FI360’s fiduciary risk score for every fund, allowing you to incorporate that element for clients and rest easy with concern to regulations.
FINSUM: In our view, Magnifi is the best way to search and filter investments, period. Once you try it out you will quickly move on from the many ETF “screeners” available.